I really have no conception of how much $2 trillion is, and I’m not helped much by knowing that it’s enough for a stack of 20-dollar bills to reach the moon. $2 trillion is really, really a lot of money – I got that part. I know that it is $2,000 billion, and that helps some because I have some sense of what a billion is. I also know that $2 trillion is equivalent to 1/7th of the entire U.S. economy, which has a GDP of about $14 trillion. So $2 trillion is a huge amount of money, but it is a relatively small piece of the whole, about 14%.
$2 trillion is the amount that businesses are currently holding in cash and short-term investments rather than investing in long-term productive activity that would create jobs and thereby spark our stagnant economy to life.
$2 trillion is also roughly the additional amount that full-time workers would earn each year if productivity growth had been shared since 1979 the way it was for more than thirty years before 1979. (I get this from Steven Greenhouse’s The Big Squeeze, page 5, where he calculates that shared productivity growth would result in full-time workers earning about $22,000 more than they actually do. There are about 100 million full-time workers, and multiplied by $22,000, that amounts to $2.2 trillion.)
I think these two different $2 trillion amounts are related. That the $2 trillion lost to workers by the disappearance of productivity sharing has piled up in corporations where they cannot find a useful purpose for it. And because their wages have stagnated, workers do not have enough spending power to buy all that our economy can produce, and that this insufficiency of wages and salaries is the principal cause of our current economic stagnation. If this is so, then raising wages (and quickly) would be the best way to stimulate our economy.
This is relevant because the business press is currently debating why that $2 trillion in corporate cash and short-term investment is being “sidelined” (meaning not just temporarily out of the game and ready to substitute for existing players, but in the football metaphor, that the economy is playing with only 9.5 players rather than 11). One view says this huge amount of money is sidelined because of “business uncertainty” related to all the new regulations the Obama administration is imposing. The other view holds that businesses are sitting on this money because there is insufficient consumer demand to assure businesses of profitable investment opportunities. The second view believes that if consumer demand were “robust,” businesses would take that $2 trillion off the sidelines and even borrow money to invest in productive economic activity. The vast majority of consumers are wage-earners, of course, the same folks who lose about $2 trillion a year because they have not been sharing in economy-wide productivity gains.
If these various $2 trillion amounts are related as cause and effect, it means that transferring some part of the $2 trillion in sidelined money – say just $500 billion – to workers in increased wages and salaries would result in more profitable opportunities, thus more business investment, millions more jobs, even more profitable opportunities, and an economy growing at 5% or 6% (for a while) rather than the hoped for 3% growth that is now projected. At 3%, a good growth rate in normal times, it might take a decade to get unemployment down to below 5%, and meanwhile an enormous amount of permanent social and economic damage will continue to be done.
Though I’m not an economist, I am well aware that there is no existing mechanism for increasing wages that dramatically across the economy – a $500 billion transfer from the corporate pile to wages and salaries would amount to a $5,000 increase for every full-time worker. Unions are now too weak to get substantial increases like that for their own members, let alone to have their traditional positive “spillover” effect on nonunion workers. And the federal minimum wage is now so low (at $7.25 an hour) that raising it even very dramatically (to say $10), while highly desirable, doesn’t affect enough workers to get much of that corporate pile off the sidelines.
The point is that our economy is growing too slowly because workers don’t have enough consumer spending power, and as a result, businesses don’t have enough investment opportunities to put all their capital to work. Investors have too much because workers have too little, and vice versa. Transferring a sizeable chunk of it would probably be good for everybody.
Fighting for living wages and improving prospects for union organizing are the best options to restore productivity-sharing going forward. But in the short-term, to get us out of our current stagnation, the one best way to restore the balance between investors and consumers might be to raise taxes on corporations and high-end individuals and then air drop the resulting revenue in 20-dollar bills onto low-wage communities across the country.
If that strikes you as a frivolous idea, ask yourself why there is no national discussion of how to restore productivity sharing in order to increase wages, consumer demand, business investment, and millions and millions of jobs. Ask yourself why, instead, we’re discussing how to cut Social Security and public service workers’ jobs and pensions.
Jack Metzgar, Chicago Center for Working-Class Studies